The recent spike in cryptocurrency prices has certainly drawn a fair share of cheerleaders and critics alike, but the reality of that spike has been a simultaneous rise in network fees due to increasing transaction volumes.
Binance is accused of deliberately smothering Ethereum’s network in an attempt to bring more users to its own platform
The resulting volumes have clogged networks like Ethereum that have seen Gas costs have increased nearly 20 times in the past 12 months. For the growing DeFi market, this sky-high cost has generated significant criticism from the community and mobilized the ecosystem to look for cheaper options. Enter Binance, which can dethrone Ethereum as a new DeFi hotspot due to its interoperability and lower transaction costs.
Binance Smart Chain (BSC), which is working on a POA (Proof of Authority) model, is centralized relative to Ethereum’s fully decentralized approach (Binance selects the authorities to run each node). This has led some users to criticize the approach, believing that Binance is abusing its clout and market power to intentionally clog the Ethereum network. This sharp criticism, however, misses the overall picture.
A quick look at wallet and gas data reveals that Binance is the largest single gas donor. For example the Image above tweeted from Nansen AI Binance spent the equivalent of almost 5,000 on February 12-18 ETH alone in gas. Although many users are quick to criticize published data from Asian exchanges known for increasing trading volume, this data can be confirmed by Etherscan data.
The data show that in terms of both gas consumed and transaction volume over the past seven days Wallets attributed to Binance accounted for six out of ten of the most active wallets in the entire Ethereum ecosystem. While it could be inferred that Binance’s volume is driving up Ether costs, and doing so on purpose to attract more volume to its smart chain, this argument lacks the blockchain interoperability that Binance is promoting. In addition, Binance has not closed its taps for Ethereum, which makes the argument that it is clogging the network somewhat debatable.
Binance Pancakeswap has overtaken Uniswap
The cost of switching from Ethereum to Binance is very low, especially for smart contracts and dapps. By improving interoperability and reducing switching costs, as well as discounting developers who put valuable projects online, Binance has established itself as a formidable destination for all types of activity.
Given the volume of DeFi, a reduction in network charges and costs should find greater acceptance. Binance fills this void faster than competitors or more established chains PancakeSwapthat has overtaken Uniswap (based on Ethereum) in terms of volume.
With the barriers to switching from Uniswap to PancakeSwap (a copy of Uniswap on BSC) being relatively minor, it’s no wonder DeFi users made the leap. In addition, it caused a strong tendency Rating of Binance Coin (BNB)This also makes transactions more expensive in your own local chain.
Unlike Ethereum, however, Binance encourages the development and use of smart contracts by building a lower-cost ecosystem that rewards smart contract developers and does not necessarily use its market power to clog other competing networks.
FTX Quick to criticize
However, this has not been enough to silence critics like FTX, who hold Binance responsible for the standard chains that transactions are sent to. In one recent tweet criticismThe FTX cryptocurrency derivatives exchange has quickly focused on Binance’s withdrawal process, which by default promotes its own chains and creates conflict due to the fees it collects in return.
As a result, it has cost FTX dearly because coins were sent to the wrong chains. Accordingly, the service has decided to pass the additional cost on to users in the form of a 5% deposit surcharge for tokens sent to the wrong chain. By and large, however, this argument speaks more to user error than to Binance’s default settings.
As the Binance universe undoubtedly grows and the exchange volumes tell this reality credible truth, self-promotion of its own tools will continue to spark the same denunciations that marked the debate between decentralized and centralized exchanges. Ultimately, however, the benefit speaks loudest.
What do you think – Binance is purposely choking on the Ethereum network to attract more users? Let us know in the comments below.
Photo credit: Shutterstock, Pixabay, Wiki Commons, Binance, Twitter users NanshenAI, Etherscan